SOCIAL PARTNERSHIP

After World War II, the government, as well as industry and the trade
unions, realized that the country could not afford to repeat the
continuous social, political, and economic conflict that marked the
1920s and 1930s, when the country moved from one crisis to another until
Adolf Hitler's Anschluss in 1938. They wanted to avoid ruinous social
and industrial conflict, strikes, lock-outs, and the kind of persistent
social battles that had contributed to the paralysis of the Austrian
economy and its body politic during the interwar years.

To find a solution, the government and its political and economic
institutions reached back to earlier concepts that also had an influence
on Austrian thinking and Austrian history. One was the papal encyclical Rerum
Novarum of 1891, which had envisaged a working class that would be
gradually absorbed into a property-owning class, not through social
conflict but through constructive social cooperation. Another was the
Austrian tradition of the Labor Advisory Council (Arbeitsbeirat), which
had functioned as a section of the Ministry of Commerce from 1898 to the
outbreak World War I and which offered a model for the pragmatic
participation of the labor movement in the functions of the state and
the general direction of the economy.

After World War II, these concepts coincided with the practical
exigencies of the moment to force representatives of social groups to
work together to cope with the combination of unemployment, inflation,
and widespread poverty and misery. The ÖGB and the reestablished
business organizations of the three main economic chambers played
central roles in working out a series of wage-price agreements between
1947 and 1951. Those agreements, and the negotiations that led to them,
were based on a mutual recognition that no social group could benefit if
it imposed its demands at the expense of the collapse of the state and
its economy--a collapse that often seemed all too near in the immediate
postwar years.

The social partnership system works on the basis of a mutual
recognition of three principles. The first is that the three main
economic groups--industry, agriculture, and labor--will be properly
represented through four mutually recognized organizations--the chambers
of commerce, agriculture, and labor, and the ÖGB--that represent their
interests and that can take the responsibility for decisions. The second
is that economic decisions can be legitimately made outside the
ideologically competitive political atmosphere of parliament, thus in
effect depoliticizing crucial matters related to the Austrian standard
of living. Third, the principle of consensus will function in such a
manner that no social group is ignored, and no social group will prolong
the struggle once an agreement has been reached.

The core consultative instrument of the social partnership is the
Parity Commission. The commission consists of seven members of the
government--the chancellor, three ministers, and three state
secretaries--and two representatives each from the Federal Chamber of
the Economy, the Presidential Conference of the Austrian Chambers of
Agriculture, the Council of the Austrian Chambers of Labor, and the ÖGB.
This distribution of seats on the commission gives the interest
organizations a majority. Experts in various areas attend the meetings
in an advisory capacity. The Party Commission's decisions must be
unanimous, because the commission is not based on law, and participation
is completely voluntary.

The Parity Commission began its work in 1957 on the basis of an
exchange of letters between the president of the Federal Chamber of the
Economy and the president of the ÖGB. Its original purpose was to slow
down a troubling wage-price spiral, but it later expanded into much
broader discussions on the general trends of the European and Austrian
economies and what would be the best response to these trends. The
commission has subcommittees on wages and prices. In addition, the
commission includes the Advisory Committee for Economic and Social
Questions, which was established in 1963 to provide the basis for an
objective approach to economic policy and to conduct studies required by
the Parity Commission.

The Parity Commission, however, only deals with the central questions
of the economy. It establishes the general principles for solving
economic problems and disagreements. Below it, at the industry level,
the interest-group associations of the various chambers or the trade
unions negotiate the separate and legally binding agreements governing
employers or employees. The agreements are reached on the basis of the
broad principles and criteria set by the Parity Commission.

Some forms of social partnership involve little or no participation
of government organs. The so-called selfadministration associations
require the cooperation of interest associations in such structures as
social insurance institutions, agricultural boards, labor-market bodies
and tribunals, and in other institutions where agreements between
potentially conflicting interest groups must be reached. Those
institutions more often deal with social than with economic questions,
but the participants in the negotiations usually evaluate the broad
economic situation and the policies agreed on in the Parity Commission
as they negotiate.

Beyond the mechanics of the Parity Commission and the bitter memories
of futile class conflict, however, other elements also work to produce
an atmosphere of cooperative consciousness. One of these elements is the
virtually universal recognition by all Austrians that theirs is a small
state and a small economy in a world full of larger and potentially more
competitive actors. Austria cannot afford self-indulgence because it
would immediately risk its survival.

Another cause for cooperation rather than unbridled competition is
the large public and foreign ownership of Austrian firms. At the
beginning of the 1990s, state-owned firms constituted a total of 32.8
percent of all Austrian companies, and foreign-owned firms constituted
an additional 25.1 percent, leaving only about 35 percent in private
hands, with an additional 7 percent in scattered holdings.

The Austrian trade union movement is forced to moderate its demands
for wage increases because of the close affiliation between the Austrian
schilling and the German deutsche mark. The stability policy of the
German Bundesbank thus also has an effect in Austria. Given this fact,
the trade unions cannot usually argue that runaway inflation threatens
the standard of living of the Austrian worker.

The social partnership has been successful in maintaining a
cooperative spirit and in avoiding industrial strife. After World War
II, for example, Austria had fewer strike-minutes lost per worker than
any major economy. In many years, there were no strikes at all. However,
there has been debate about whether the social partnership and the work
of the Parity Commission and other bodies have impeded progress and if
stability could become stagnation. The danger exists that new production
and communications systems, as well as progressive organizational
structures, will not be introduced quickly and that the social partners
will find it convenient to protect established jobs and processes rather
than to revise or even revolutionize them.